Real estate firm Urithi Housing Cooperative Society is embroiled in a court dispute with some of its investors and a financier over the planned auctioning of a prime piece of land situated in Gatanga, Murang’a County.
The piece, named Panorama Gardens, was acquired by the real estate company in 2016 for Sh1.5 billion.
In purchasing the property, the company took a loan of Sh500 million from Family Bank, with the land charged as the security. The loan was to be repaid with proceeds from the sale of plots after subdivision.
But in April 2019 Urithi defaulted on the loan at Sh263.8 million, forcing the bank to appoint Nairobi-based Antique Auctions Agencies to oversee a sale, registered as L.R No.11486/6 Murang’a County.
The loan restructuring agreement between the bank and Urithi dated June 21, 2019 indicates that the land-buying company had the obligation to advertise at its own cost the project dubbed Urithi Panaroma Gardens on its website, newsletters, print and broadcast until the loan facility is repaid in full. A sign showing land for sale.
Further, the “lender (bank) reserved the right to recall the facility if this condition is not complied with”. Following the bank’s decision to publicly auction the land, some five investors who had purchased the land, where an eighth of an acre was going for Sh2.25 million, moved to court challenging the sale.
Mr Athony Mbugua Njihia, Bernard Mwangi Waweru, Purity Kabuba, Onesmus Kamau Kagwanja and Mercy Waithera Kimura sued Urithi and Family Bank at the Murang’a Law Courts.
They filed the case after realising that Urithi had procured a loan facility from the bank and charged the land as security for which default had occurred and an auction was set to take place.
According to court documents, the investors had fully paid the purchase price, which was acknowledged by Urithi. According to them, Urithi’s decision to give them vacant possession and share certificates of ownership of the plots pending registration of titles created an irrevocable constructive trust in the purchased plots in their favour.
The plaintiffs maintained that Urithi breached its contractual obligations by charging land that is wholly sold to them.
The investors have obtained an interim injunctive order stopping the bank from selling or dealing with the land title until the case is heard and determined. In issuing the order dated December 19, 2019 Justice Grace Kemei noted that according to the sale agreement entered between the investors and Urithi, it was the responsibility of Urithi to obtain the Land Control Board consents and effect the transfer of the various plots to the purchasers so that they are issued with titles.
It was part of the agreement that upon full payment of the purchase price the investors would be issued with ownership certificates as they await the issuance of titles of the various plots.
Whether the suit land was charged after or before the agreements of sales is a matter for the court to determine during trial of the case, the judge determined. “Urithi’s act of default and the bank’s acts of disposing the suit land in exercise of its statutory power of sale entitles it to alienate the land thus occasioning loss to the applicants (the investors),” said Justice Kemei in the interim injunction stopping Family Bank from auctioning the land.